The SRA have today published their decisions following consultations on “Looking to the Future: Flexibility and Public Protection” and “Looking to the Future: Accounts Rules Review”. Following extensive consultation and engagement, we are pleased that the Board of the SRA have taken into account the feedback they received and, as a result, have adapted their original proposals on the Accounts Rules. The ILFM provided a detailed consultation response following a survey which collected the views of many of our members and the SRA Director of Regulatory Policy, Chris Handford, has thanked us and told us that our input was extremely helpful to their process.
The SRA proposals had been:-
- Simplification of the Accounts Rules by removing prescriptive rules and requirements, and reducing duplication with other sections of the Handbook.
- Changing the definition of client money.
- Providing an alternative to holding client money by allowing firms to use Third Party Managed Accounts (TPMA).
Simplification of the rules and the removal of some prescriptive rules was well supported and, for example, I believe most people working in Legal Finance will be pleased to see the 14 day rule go! The guidance published alongside the new rules will be key here in ensuring that firms understand fully how to comply with the principle based rules while being able to exercise flexibility in their application.
Changing the definition of client money was, of course, more controversial and major concerns were raised over the proposal to exclude fees and professional disbursements from the definition of client money. We are therefore pleased to see that the SRA have compromised, taking on board all the comments made, and are retaining the definition of these as client money. The new rules will provide an exemption so that where the only client money that is received by a firm is advance payments for fees and unpaid disbursements for which the firm is liable, that money does not have to be held in client account. This means that firms that only handle these types of client money do not need to operate a client account.
The SRA have decided to proceed with their proposals to clarify that solicitors may use TPMAs by clearly including them within the rules. This provides an alternative to running a client account.
The SRA are developing a toolkit to support implementation of the new rules. We are assured that this will be launched well in advance of the changes. The new rules will come into force no earlier than autumn 2018, alongside the rest of the Handbook changes, but the detail should all be available this autumn to give plenty of time to prepare.
The ILFM look forward to continuing to work with the SRA and advise on the draft rules and the guidance to the rules. We are also ready to make changes to the various courses we run that will be affected by the changes to the rules and I am pleased to announce that we will be preparing and running a programme of day courses to help you prepare for the new rules and to help you make sure your systems all comply. Do look out for these courses and make sure you get your place booked!
13th June 2017